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G10 Debt Distribution


Britain is in the shadow of The City. Yet one wonders about what Morgan Stanley includes as "financial debt". It would appear not to include derivatives. After all, are they not supposed to net to zero?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Dec 4th, 2011 at 08:23:02 PM EST
[ Parent ]
Guess Which Country Has Debt Of Nearly 1000% Of GDP...

A few notes here:

  • This chart is looking at all kinds of debt, not just sovereign debt. The UK's staggering debt-to-GDP ratio is largely due to the size of its financial sector.
  • All financial sector debt is, to some extent, potentially government debt, since all governments end up having to rescue their financial sectors in the event of a crisis. That's what brought down Iceland and Ireland.
  • And yet, for reasons we explained here, the UK is still seen as a gold-standard among safe-havens.


Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Sun Dec 4th, 2011 at 10:29:01 PM EST
[ Parent ]
and yet, for reasons which are entirely ideological, all UK parties of government believe that household debt is that which should be specifically punished while financier debt should be encouraged.

This is not helped by the media. Robert Peston, the BBC economics editor widely regarded as the first to spot the British crash, had  a programme on last night where logic was bent and twisted with origami-like precision to present the idea that all of the public were guilty of crashing the economy and those poor financiers were just caught up in the national hysteria. I gave up in disgust, the problem is that I imagine Peston's worldview is so captured by the City that he sincerely believes that this is how it was

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon Dec 5th, 2011 at 03:06:31 AM EST
[ Parent ]
Well, I'm not so sanguine about household debt, and actually it's been promoted far too much in English-speaking countries.

Government debt is, I believe, far less problematic than household debt, especially of the revolving consumption credit variety. It's also often compensating for stagnating or regressing earnings during an increase in productivity.
Household investment debt, absent property bubbles, is of course less worrysome.

However, property bubbles have been encouraged so there is quite a bit of risk there too.

This is not to absolve financial debt. Actually, I don't see UK parties of government fighting household debt so hard (they are fighting government debt). Privatising pensions and NHS is a sure way of promoting it.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Mon Dec 5th, 2011 at 03:29:49 AM EST
[ Parent ]
Given that the compilation is by Morgan Stanley, who has US$40 billion in CDS exposure to French banks alone, much of it guaranteeing those banks' loans to Greece and Italy I have to wonder if they found some rationale for including some forms of derivatives for the UK that doesn't affect US banks. I would be more interested in a graph that showed all credit exposure divided by GDP.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 5th, 2011 at 11:09:03 AM EST
[ Parent ]
I similarly was wondering if due to the UK's casual attitude to corporate taxes, and rather lax view of corporate control, whether lots of countries are actually parking or making their loans  on paper inside the UK's financial district, from UK subsidiaries, rather from their local banks.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Mon Dec 5th, 2011 at 11:20:04 AM EST
[ Parent ]
The "UK's casual attitude to corporate taxes, and rather lax view of corporate control" undoubtedly has a lot to do with the size of the operations of The City. There was a reason that Goldman and others had their riskiest activities based out of the U.K. -- a world class city with the regulatory environment of a tax haven. But I still have to wonder about which activities are included and which are left out in the data on which the graph is based.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 5th, 2011 at 03:02:00 PM EST
[ Parent ]

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